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November 29th Market Wrap-Up

After the big huge up day of Wednesday, it was not unexpected to see some profit-taking/consolidation in today's trading. How can you identify whether the early selling today was profit-taking versus the markets selling back off? Each candlestick signal allows an investor to identify the nature of the selling. The graphics of candlestick's quickly identify the strength of buying or selling. Simple analytical techniques, such as utilizing the 10 minute charts, allows an investor to recognize when the selling has stopped and when the buying has started again. Today's trading, closing as a Doji, reveals that there was no dramatic selling force in today's trading. It also provides the prospects of a positive open tomorrow leading to a bullish Doji sandwich day. Currently, because the indexes are trading above the T line, it has to be assumed that the uptrend is in progress. With this assumption, the 50 day moving average and the 200 day moving average become the next likely target. This provides a strong implication of a few more days to the upside.

If the markets are not showing any dramatic selling pressure, candlestick patterns continue to perform with better upside prospects than merely uptrending stocks in an uptrending market. The results of candlestick signals and patterns usually produce much stronger price moves based upon the identifiable build up of investor sentiment. A pattern is developed by reoccurring human nature that has less tendency to react quickly to a change of overall market trend. Simply stated, a pattern will usually give an investor an extra day or two to get out without any severe losses after the overall market may have turned in the opposite direction. These two benefits, an orderly strong price moves based upon signal and pattern results, and more time to close out profitable positions after the general market may have gone the opposite direction allows candlestick investors to dramatically improve their profitability. Having the ability to correctly analyze the direction of the overall market allows for analyzing which pattern breakouts create the biggest profit potentials.

Chat session tonight at 8 PM ETwith Stephen Bigalow. Click here to register.

Good Investing,

The Candlestick Forum Team



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